Question 1

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Accepted Answer

A) True 
 B)False

Question 2

Suppose that you find out from an L.L. Bean catalogue that a sweater costs $30.00. In this case, money is serving as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  double coincidence of want. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  double coincidence of want.

Question 3

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

Accepted Answer

The Federal Reserve System divides the n

Question 4

When the Fed conducts an open market operation by purchasing securities from a bank, ________.

Accepted Answer

A)  public holdings of securities increase 
B)  the bank's deposits increase but its reserves do not change 
C)  the bank's deposits increase but its reserves decrease 
D)  the bank's reserves increase 
A)  public holdings of securities increase 
B)  the bank's deposits increase but its reserves do not change 
C)  the bank's deposits increase but its reserves decrease 
D)  the bank's reserves increase

Question 5

Pooling of risk occurs when depository institutions

Accepted Answer

A)  make assets more liquid. 
B)  specialize in loaning only to good borrowers. 
C)  bring lenders together. 
D)  lend to a variety of different borrowers. 
A)  make assets more liquid. 
B)  specialize in loaning only to good borrowers. 
C)  bring lenders together. 
D)  lend to a variety of different borrowers.

Question 6

The required reserve ratio

Accepted Answer

A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that is required to be held in reserves. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans. 
A)  is the amount of money that banks require borrowers to reserve in their accounts. 
B)  is the fraction of a bank's total deposits that is required to be held in reserves. 
C)  increases when withdrawals from a bank are made. 
D)  is higher for banks that make riskier loans.

Question 7

Financial innovations can have the effect of

Accepted Answer

A)  only decreasing the demand for money. 
B)  only increasing the demand for money. 
C)  either increasing or decreasing the demand for money depending on what the innovation is. 
D)  increasing the Fed's monetary policy. 
A)  only decreasing the demand for money. 
B)  only increasing the demand for money. 
C)  either increasing or decreasing the demand for money depending on what the innovation is. 
D)  increasing the Fed's monetary policy.

Question 8

A bank cannot create money unless its ________.

Accepted Answer

A)  required reserves are greater than actual reserves 
B)  excess reserves are zero 
C)  desired reserves are greater than actual reserves 
D)  excess reserves equal deposits multiplied by the reserve ratio 
A)  required reserves are greater than actual reserves 
B)  excess reserves are zero 
C)  desired reserves are greater than actual reserves 
D)  excess reserves equal deposits multiplied by the reserve ratio

Question 9

The monetary base consists of

Accepted Answer

A)  the quantity of money. 
B)  currency and reserves of depository institutions'. 
C)  demand deposits and vault cash. 
D)  government securities held by the Fed. 
A)  the quantity of money. 
B)  currency and reserves of depository institutions'. 
C)  demand deposits and vault cash. 
D)  government securities held by the Fed.

Question 10

Checking deposits are

Accepted Answer

A)  not part of money. 
B)  part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts. 
A)  not part of money. 
B)  part of money. 
C)  small in volume relative to currency in circulation. 
D)  quite different from checking accounts.

Question 11

When you buy a hamburger for lunch, you are using money as a

Accepted Answer

A)  store of value. 
B)  standard of deferred payment. 
C)  medium of exchange. 
D)  unit of accounting. 
A)  store of value. 
B)  standard of deferred payment. 
C)  medium of exchange. 
D)  unit of accounting.

Question 12

Based on the data in the table above, what is the value of M2?

Accepted Answer

A)  $2,950 billion 
B)  $4,187 billion 
C)  $7,978 billion 
D)  $8,587 billion 
A)  $2,950 billion 
B)  $4,187 billion 
C)  $7,978 billion 
D)  $8,587 billion

Question 13

Which of the following is NOT included in the M2 definition of money?

Accepted Answer

A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits 
A)  currency held by banks 
B)  money market mutual fund balances 
C)  savings deposits 
D)  checkable deposits

Question 14

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

Accepted Answer

A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  source of liquidity 
A)  medium of exchange 
B)  unit of account 
C)  store of value 
D)  source of liquidity

Question 15

"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect on two dimens

Question 16

The table below shows data for Indonesia between 2005 and 2006.
 
Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia's inflation rate

Accepted Answer

A)  is higher in 2005 than in 2006. 
B)  was 17.5 percent in 2006. 
C)  is 27.1 percent in 2005. 
D)  will increase over the 12 months. 
A)  is higher in 2005 than in 2006. 
B)  was 17.5 percent in 2006. 
C)  is 27.1 percent in 2005. 
D)  will increase over the 12 months.

Question 17

Which of the following is TRUE regarding money market mutual funds?
I.Money market mutual funds buy highly liquid assets like Treasury bills.
II.Shareholders can obtain loans from money market mutual funds.

Accepted Answer

A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II 
A)  I only 
B)  II only 
C)  both I and II 
D)  neither I nor II

Question 18

An open market purchase of securities by the Fed

Accepted Answer

A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed. 
A)  increases banks' reserves and decreases banks' securities. 
B)  decreases banks' reserves and increases banks' securities. 
C)  decreases banks' total assets. 
D)  involves a bank purchasing government securities from the Fed.

Question 19

The desired reserve ratio helps determine the amount of money banks can create.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

Accepted Answer

A)  zero. 
B)  $7,500. 
C)  $67,500. 
D)  It is impossible to determine without additional information. 
A)  zero. 
B)  $7,500. 
C)  $67,500. 
D)  It is impossible to determine without additional information.

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Suppose that you find out from an L.L. Bean catalogue that a sweater costs $30.00. In this case, money is serving as a

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

When the Fed conducts an open market operation by purchasing securities from a bank, ________.

Pooling of risk occurs when depository institutions

The required reserve ratio

Financial innovations can have the effect of

A bank cannot create money unless its ________.

The monetary base consists of

Checking deposits are

When you buy a hamburger for lunch, you are using money as a

Based on the data in the table above, what is the value of M2?

Which of the following is NOT included in the M2 definition of money?

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect.

The table below shows data for Indonesia between 2005 and 2006. Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia's inflation rate

Which of the following is TRUE regarding money market mutual funds? I.Money market mutual funds buy highly liquid assets like Treasury bills. II.Shareholders can obtain loans from money market mutual funds.

An open market purchase of securities by the Fed

The desired reserve ratio helps determine the amount of money banks can create.

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Exam 8: Money, the Price Level, and Inflation

The main policy-making body of the Federal Reserve System is the Federal Open Market committee.

Suppose that you find out from an L.L. Bean catalogue that a sweater costs $30.00. In this case, money is serving as a

What is the interaction between the Federal Reserve districts and the Board of Governors of the Federal Reserve System?

When the Fed conducts an open market operation by purchasing securities from a bank, ________.

Pooling of risk occurs when depository institutions

The required reserve ratio

Financial innovations can have the effect of

A bank cannot create money unless its ________.

The monetary base consists of

Checking deposits are

When you buy a hamburger for lunch, you are using money as a

Based on the data in the table above, what is the value of M2?

Which of the following is NOT included in the M2 definition of money?

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

"A bank can only use its excess reserves to make loans, while required reserves can only be used to buy U.S. government securities." Explain whether the previous statement is correct or incorrect.

The table below shows data for Indonesia between 2005 and 2006. Assume the rate of velocity change is constant. According to the quantity theory of money, Indonesia's inflation rate

Which of the following is TRUE regarding money market mutual funds? I.Money market mutual funds buy highly liquid assets like Treasury bills. II.Shareholders can obtain loans from money market mutual funds.

An open market purchase of securities by the Fed

The desired reserve ratio helps determine the amount of money banks can create.

Suppose a bank is exactly meeting its desired reserve ratio of 10 percent and a new deposit of $75,000 is made. Immediately after the deposit is made, the bank's excess reserves equal

What Is Economics?

The Economic Problem

Demand and Supply

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

International Trade Policy

Filters